Plans to raise taxes will hit recovery – FSB
The UK government’s plans to increase taxes in April will hold back the economy’s fragile recovery, according to a leading business body.
The Federation of Small Businesses (FSB) said hikes in National Insurance Contributions (NICS) and dividend tax rates will add to inflationary pressure and lead to firms putting the brakes on hiring, while also discouraging investment.
Its latest quarterly business confidence index shows optimism among small firms fell after the controversial announcement of plans to increase NICS.
The quarterly index now stands at +16.4, down more than two points on its previous reading.
Close to two thirds (62 per cent) of the nearly 1,400 small firms surveyed for the study do not expect their business performance to improve over the coming three months.
A third of employers say they would be forced to increase prices due to the tax changes.
They also said they will also cut their own pay, recruit less, and scale back investment.
Among company directors – who were excluded from the UK government’s income support programmes during lockdowns – four in ten say the tax changes would inhibit their abilitytosaveforthefuture,furtherreducingthealready-small share that saves into a pension.
Four in ten sole traders also say they will have to increase prices, with 6 per cent saying they will shut down their business permanently if the NIC hike goes ahead unchecked.
FSB national chairman Mike Cherry said: “Small businesses right across the UK are hoping this Budget reflects the [UK] government’s aspiration to create a low-tax, high-productivity economy.”